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Read the passages given below carefully and answer the questions that follow:

The new form of direct marketing is a big step up from today’s crude version. But it is also in some ways a step backwards. The first direct marketers were trusted, local shopkeepers. Compared with today’s direct marketers, whose best stab at intimacy is a pre-printed letter with a misspelt name, the local shopkeeper really knew his customers – remembering when to order a favourite bolt of fabric for one, suggesting a new cough tincture to another. “He carried his database in his head”, says Don Peppers, who with Martha Rogers was an early advocate of personalised marketing.

The transformation of direct marketing from its local origins into advertising’s downmarket cousin dates from the birth of mass production, which enabled manufacturers to produce goods in large quantities for sale by chain stores to unseen buyers. The first mass produced shoes in America were called “straights”, with identical shapes for left and right feet. Lester Wunderman, inventor of the term “direct marketing”, believes that mass production has conditioned consumers to expect unsatisfactory service and goods. “It created a culture of things that didn’t quite fit, didn’t quite suit and didn’t quite serve”, he says.

With mass retailing came mass advertising. Without direct contact with the consumer, manufacturers could not know who was buying what; only what was selling. Mass advertising established a link between a product and millions of faceless consumers. Brands – encapsulating a short, memorable message – were part of this relationship. The result has in many cases been fantastically successful: Coca-Cola has created an image that is instantly recognised and even has emotional resonance.

Yet branding is, at best, an imprecise art. Most consumers would be hard-pressed to explain why, say, Levis or Nike are losing cachet to such newcomers as Tommy Hilfiger. Because they sell through huge retailers, producers struggle to know why customers buy their brands. As advertising costs have risen and the media have fragmented, mass marketing has become harder and more costly. That, plus new computer technology has pushed direct marketing into the limelight. Its full potential is only just being grasped. By manipulating information, including data over the Internet, direct marketing can be targeted and personalised. It can even be intelligent–learning what customers like from what they buy and where they browse, as well as soliciting feedback via the telephone and e-mail. The result can be more effective than mass advertising.

The low costs of direct marketing have created a huge and fast-growing industry–made up of direct mail, telemarketing, database marketing, the Internet and free phone TV, radio and print advertisements. In its biggest market, North America, the industry was worth $\$ '163$ billion in $1998,$ when it grew by $7\%$ to almost three-fifths of the country’s total spending on advertising. The industry expects $7\%$ annual growth to $2002,$ beating the $5.5\%$ forecast for advertising spending

Direct marketing is growing even faster in places where junk mail is new enough still to be welcome. Robert Wientzen, president of America’s Direct Marketing Association, says that in Russian and the Czech Republic most junk mail is opened and read – indeed the average piece is pored over by more than one person. Even in China, despite an unreliable postal service and few credit cards, the government in encouraging direct marketing, partly to stop people migrating to cities in search of things to buy.

Yet most direct marketing remains clumsy. Britain’s Direct Marketing Association admits its members spend $\$ 30,000$ (dollar $49,000$) a year sending mailings to dead people. Typical success rates for most mailshot campaigns in mature countries are no better than $2\%.$ Steve Dapper, chief executive of Rupp Collins, a big direct marketing agency, complaints that consumer data are sold too freely, leading to pesky cold calls and junk mail. The trouble is that direct marketing is still driven by the same thinking as mass marketing.

Most direct marketing is based on profiles built by classification systems that use a mixture of census data, questionnaires, and electoral roll information and, in America, credit- card data to segment populations. This information is passed to a direct marketing agency to slice into profiles. Having defined a type, the agency buys the names and addresses of similar people from mailing lists sold by list brokers. The profiles are not sophisticated. Scott Adms, creator of the Dibert cartoons, jokes that the most important category is “the Stupid Rich”, so named because of their tendency to buy anything that’s new, regardless of cost or usefulness. If you sell enough to them, he says, you can afford to sell the rest to "The Stupid Poor".

The author feels that it is important to sell to "The Stupid Rich" because:

  1. They will buy anything new, contributing to profits
  2. You can then afford to sell the rest to "The Stupid Poor"
  3. It is easier to sell to “The Stupid Poor”
  4. None of the above.
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